Amazon's Bezos calls Best Buy turnaround 'remarkable' as unveils new TV partnership

SEATTLE – It was a surreal moment: Jeff Bezos, whose company many once thought would put Best Buy out of business, not only trading compliments with his competitor but also acknowledging he could use its help to sell products.

With a beaming Best Buy CEO Hubert Joly sitting next to him, the two men gushed about their mutual respect and trust of one another while talking Tuesday about a new partnership for the Richfield-based electronics retailer to be the exclusive seller of new smart TVs with Amazon's Fire TV and Alexa voice assistant built into them.

"I've watched Best Buy for a long time, and the last five years, since Hubert came to Best Buy, have been remarkable," Bezos said in a rare interview with a handful of reporters in advance of the Wednesday partnership announcement. "The turnaround that got done there, from just a business case study point of view, is going to be written about and talked about for a long time."

Bezos — the founder of Amazon who has upended the retail world by selling items online, and become one of the world's richest men in the process — also conceded that stores will continue to play an important role for years to come even amid the massive disruption underway.

"Physical stores aren't going anywhere," he said at a clandestine event held in the back room of a Best Buy store in Bellevue, across the water from Amazon's headquarters. "E-commerce is going to be a part of everything, but not the whole thing."

Joly nodded in agreement.

Both Amazon and Best Buy sell TVs online, but Bezos said many consumers still like going to stores when making such big-ticket purchases, especially since TVs are so difficult to move, install and return. That's one of the things that made Best Buy, with its 1,000-plus stores, an appealing partner.

"Best Buy, with a very large physical footprint, lets people come into the stores and see the product, which is very important," said Bezos. "People do want to come in and see the TV. They want to experiment with the TV — try it out."

While their two companies are also rivals, Bezos and Joly were all smiles Tuesday morning as they revealed how closely they had been working together on the Fire TV Edition models that directly embed streaming services such as Netflix, Hulu and Prime Video into the televisions without requiring additional add-on devices.

Consumers will also be able to access Alexa by speaking through the TV's remote control or by linking it up to an Echo device to search for programs, see the weather forecast or read lyrics while streaming songs.

As part of a multiyear agreement, Best Buy will be the exclusive seller of the TVs through its stores and website. In addition, it will for the first time become a third-party seller on Amazon to peddle the TVs there, too.

Mike Mohan, Best Buy's chief merchandising officer, said the retailer has no plans to sell other items beyond these TVs on Amazon.

The first dozen or so models will start rolling out this summer and will be sold under the Toshiba and Insignia brands, the latter of which is one of Best Buy's private labels. Executives said other brands, screen sizes and price points will follow.

For his part, Joly has often spoken highly about Amazon, noting that there's space for both retailers to be winners since they together account for less than 25 percent of total market share in the consumer electronics space. Smaller players, he has said, are the ones who are more likely to come up short.

After he became CEO of Best Buy in 2012, Joly put into place an aggressive plan that included matching online prices of competitors such as Amazon, building mini-shops inside its stores to feature its biggest vendors like Samsung and Sony, and leaning into the expert service and advice of its blue-shirted employees.

After years of improved profitability and growth, Joly last year proclaimed Best Buy's turnaround phase officially over. As if to punctuate that point, the company recently reported its best holiday sales growth in 14 years.

The partnership with Amazon on TVs, Joly said on Tuesday, is yet another example of Best Buy linking up with the world's foremost tech companies to bring the best products to consumers. He added that the two companies have worked together in the past.

"This is not the beginning of a beautiful friendship, to quote 'Casablanca,' " Joly said. "This is a beautiful friendship that started with the Kindle, and, of course, has evolved with Alexa."

Best Buy began selling Amazon's Kindle e-readers nearly a decade ago. It has since added other Amazon devices to its lineup, including Fire tablets and TV sticks for streaming content, as the online juggernaut has become a bigger maker of products in addition to selling things.

In the past year, Best Buy has also rolled out Alexa displays, as well as those for Google Home, to 700 stores to better explain how to link those devices to other household gadgets.

While the two are competitors on the selling side, this tie-up shows that Amazon realizes it also needs to cooperate with retailers as it becomes more of a hardware company, said Stephen Baker, an analyst with the NPD Group.

"There's never going to be enough scale online — most volume still happens offline — if they want to be successful with those products," he said. "Meanwhile, Best Buy is putting its blinders on and saying, 'I'm dealing with Amazon as a hardware company. My mission is to provide the best choices and products and prices regardless of where they come from.' "

Amazon and Best Buy is the latest "frenemy" pairing in the retail industry that seemed unlikely just a few years ago, said retail consultant Carol Spieckerman.

Last year, for example, Amazon also began tapping into Kohl's stores to allow its customers to return online purchases at some of that chain's department stores.

Best Buy is an obvious partner for Amazon because it's pretty much the only major consumer electronics specialist left, she said.

"Not only is Best Buy kind of the last one standing, but they take a lot of pride in their in-store service and expertise," Spieckerman said. "And they're a consumer electronics retailer that has decided that its future lies in investing in brand relationships."

While it has been seen as a major contributing factor to the downfall of many retailers from Toys 'R' Us to Sports Authority, Amazon has been dabbling with some stores of its own.

It has been opening bookstores in some cities and recently opened an experimental cashier-less convenience store called Amazon Go in its hometown of Seattle. Last year, it also bought Whole Foods, which has nearly 500 stores.

Bezos said stores are far from obsolete. He likened the current predicament of stores to that of movie theaters in the age of streaming services.

"For so long, people have predicted the demise of movie theaters, but people still like to go to the movies," he said.

In order to adapt and survive, many movie theaters now serve full meals, tout bigger and more comfortable chairs and offer assigned seating. Similarly, stores are now trying to figure out how to better cater to consumers, Bezos said.

"You're going to see so many different retailers experiment in different ways and approach that evolution in different ways, but there's just a lot of good things that you can do in physical stores," he said.

Kavita Kumar • 612-673-4113